* European shares stabilise after sell-off, Asian shares
* Euro holds its ground before ECB, eyes on inflation
* Strong U.S. jobs numbers heighten Fed angst ahead of
By Marc Jones
LONDON, Dec 5 European shares steadied on
Thursday after three days of selling, as focus turned to whether
the European Central Bank will offer any new economic stimulus
after the Bank of England left its interest rates at a record
Markets remained under pressure amid peculation about the
future of U.S. monetary stimulus. That kept bond yields elevated
and left shares struggling to recover from this week's declines.
European shares were virtually flat before the 1245
GMT ECB rate decision and 1330 GMT news conference, as traders
waited to hear what the head of the bank, Mario Draghi, had to
The euro was biding its time around $1.36. Benchmark
German government bond yields stabilised after
they were pushed to a six-week high by a rise in U.S. yields on
The ECB is expected to hold off any new policy action after
delivering a surprise rate cut last month. Attention is shifting
to the bank's new economic forecasts, amid worries the euro zone
is slipping towards Japan-style deflation.
"The main focus will be the forecasts and what will 2015
look like," said Ned Rumpeltin, the head of G10 FX strategy for
Standard Chartered. "If the inflation mid-point is below 1.5
percent, I think that is an affirmation of their easing bias
through next year."
The Bank of England left its rates and bond buying
unchanged, as expected. Markets still remained cautious before
the ECB meeting and U.S. economic data, particularly the
non-farm payrolls report on Friday.
After suffering its biggest one-day fall in six weeks on
Wednesday, the Nikkei ended down another 1.5 percent,
retreating further from this week's six-year closing high.
"Starting from two days back, people are starting to get
quite nervous about the market," a Tokyo-based senior trader at
a European bank said.
The dollar has also faded below 103.00 yen, giving investors
an excuse to book profits on the market's gains. The Nikkei is
up 8 percent since early November, and 46 percent on the year so
Offshore funds appeared to be cheering for the market.
Foreigners bought a net 368 billion yen worth of Japanese shares
in the week through Nov. 30, on top of 709 billion yen in the
week before that.
Caution had also ruled elsewhere in Asia, with MSCI's
broadest index of Asia-Pacific shares outside Japan
off 0.4 percent, and Shanghai down 0.2
Australia's main index shed 1.4 percent as Qantas
Airways tumbled as much as 15 percent. The carrier
Fissued a profit warning and announced job cuts.
Wall Street was indecisive on Wednesday, and early futures
prices pointed to another subdued start in New
Strong U.S. data this week has triggered a stock market and
bond sell-off on expectations an improved economy means monetary
stimulus will be withdrawn. A strong reading on private hiring
has led to speculation payrolls could be upbeat, hastening the
day when the Federal Reserve starts trimming its asset buying.
Although data on services and housing were more mixed, the
risk was enough to leave 10-year Treasury yields near
three-month highs at 2.82 percent by 1200 GMT. But
rising long-term yields are exactly what the Fed wants to avoid,
so the gain argues against a start of tapering this month.
The lift in yields helped the U.S. dollar regain some ground
on the yen, though it had faded back below 102 as Europe
gathered pace. It may get further support if U.S. gross domestic
product data gets revised up later Thursday.
A major mover was the Canadian dollar, which sagged
to 3 1/2-year lows after the Bank of Canada issued a dovish
policy statement, highlighting the risks of weakening inflation.
The euro was steady at just under $1.36, after
rebounding from a low of $1.3527 on Wednesday. Service sector
data had showed activity in Italy and France shrinking in
November but expanding in Spain and Germany, highlighting the
divergence in the bloc.
There was more good news for Spain as Moody's upgraded its
credit outlook to stable from negative, citing a rebalancing of
and a brighter medium-term view for the country's economy.
In commodity markets, spot gold edged back to $1,233
an ounce, giving up some of Wednesday's 1.7 percent rally.
U.S. crude added another 25 cents to $97.45, on top
of a 1.2 percent rally on Wednesday after data showed domestic
crude stocks fell by 5.6 million barrels, snapping 10 straight
weeks of builds. Brent crude hovered at $111.87.